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NBFC Registration

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  • Support for Audit and Secretarial Compliance
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NBFC Registration - What is NBFC?

NBFC (Non-Banking Financial Company) is engaged in financial activities as defined under section 45-IA of the RBI Act 1934 but does not possess a banking license. A company can offer services such as Loans and Credit Facilities, Assets Financing, Acquisition of Shares, Stock, Bonds, Hire-Purchase, Insurance, Currency Exchange, Peer to Peer Lending, hedge funds etc.

However, they do not have permission to perform banking operations of accepting demand deposits from the public. They also cannot issue cheques drawn on it.

NBFCs are registered as per the rules and regulations prescribed under Companies Act 2013 and the RBI Act 1934. They are playing a vital role in executing financial functions in the economy. They help to meet the demand that remains unfulfilled by the traditional banking system in shorter processing time.

An NBFC can provide both secured and unsecured loans to the takers based on alternative lending models. The government has been promoting NBFC so that the unorganised money lenders and people willing to run financial services can organise their lending operations.

Benefits of NBFC License- Business Environment for NBFC in India.

The business environment in India is favorable for exponential growth. Financing business in India is highly regulated by the Reserve bank of India. Hence NBFC registration offers many benefits. A Registered NBFC allows to gain the confidence of borrowers, offers you the security of capital invested in the business.

Low-Cost NBFC Registration Process

Low-Cost NBFC Registration Process

01

Legal and Business risk

Legal and Business risk

02

Attracts more borrowers

Attracts more borrowers

03

Easy to Raise Investments in NBFC

Easy to Raise Investments in NBFC

04

Access of CIBIL

Access of CIBIL

05

Open Interest Rate without any Cap

Open Interest Rate without any Cap

06

Free to charge Processing Fees–No Cap

Free to charge Processing Fees–No Cap

07

Protection by Law for recovery of loan

Protection by Law for recovery of loan

08

Easy Bank Finance

Easy Bank Finance

09

Up to 100%, FDI Allowed

Up to 100%, FDI Allowed

10

Quick Loan Processing

Quick Loan Processing

11

Soft Eligibility Criteria

Soft Eligibility Criteria

12

Fewer Rules and Regulations

Fewer Rules and Regulations

13

What are the Roles and Functions of an NBFC?

NBFCs play a significant role in conducting financial services in the Indian economy. NBFC in India have undergone too many transformations in recent years. At present, most of the NBFC Start-ups have adopted high-end tech based business model.

These NBFCs are working actively to promote financial inclusion & as well aggressively complementing the banking sector.

  • NBFC creates a favorable balance in addressing the financial needs of the country, where a large number of applicants are turned down by traditional Banks of India.
  • NBFC provides loans based on alternative credit scoring model to assess the loan application.
  • Indian Fintech Start-ups have been using NBFC model to offer financial services.
  • Credit growth of registered NBFCs is recorded at 24.3% per year as against 21.4% for banks.
  • These NBFCs are working actively to promote financial inclusion & as well aggressively complementing the banking sector.
  • NBFC creates a favourable balance in addressing the financial needs of the country, where a large number of applicants are turned down by traditional Banks of India.
  • NBFC provides loans based on alternative credit scoring model to assess the loan application.
  • Indian Fintech Start-ups have been using NBFC model to offer financial services.
  • Credit growth of registered NBFCs is recorded at 24.3% per year as against 21.4% for banks.

Checklist for NBFC Registration in India

According to Section 45(1A) of the Reserve bank of India for any company to register as NBFC , the below conditions must fulfil.

  • Directors Profile

    at least 1/3 of Directors must have experience in Finance.

  • Unique Business Plan

    The company must have a detailed business plan for the next 5 years

  • Owned Fund

    the Shareholders in total, Must have Rs. 2 Cr as a net owned fund, Invested Capital must not be the borrowed fund. A gift from Spouse is considered as an Owned fund.

  • Clean Credit History

    The Directors and Shareholders must have no write-offs or have not willfully defaulted the repayment of loans to NBFC/Bank.

  • Experienced NBFC Advisor

    Registering an NBFC as well as meeting the Regulatory compliance requires expert knowledge. Hence you may need to hire an experience NBFC Consultants to take care of NBFC Registration and Compliance after Cor.

What are the Types of NBFC in India?

There are two categories of NBFC. These are distinguished on activities in operation as well as on the authorization to take deposits.

NBFC Based on the Authorization to Take Deposits

  • The Deposit Taking NBFC (Type -1)
  • Non-Deposit accepting NBFC (Type -2)

NBFC Based on their Activities

NBFC Based on their Activities

Investment and Credit Company

Investment and Credit Company

Infrastructure Debt Fund (IDF-NBFC)

Infrastructure Debt Fund (IDF-NBFC)

Factors (NBFC-Factors)

Factors (NBFC-Factors)

Peer to Peer Lending Marketplace

Peer to Peer Lending Marketplace

Infrastructure Finance Company

Infrastructure Finance Company

Core Investment Company

Core Investment Company

Micro Finance Institution (NBFC-MFI)

Micro Finance Institution (NBFC-MFI)

Mortgage Guarantee Company

Mortgage Guarantee Company

Housing Finance Company

Housing Finance Company

Chit Fund Company

Chit Fund Company

Mutual Benefit Finance Company

Mutual Benefit Finance Company

What are the NBFC Pre Registration Requirements?

Before the NBFC filing there are certain pre-registration requirements for a registration of NBFC:

  • Register a Company as per Companies Act 2013
  • Arrange Capital of Rs. 2 Crore (Minimum capital requirement for an NBFC)
  • Create a Fixed Deposit of Rs 2 CR
  • FDI Compliance as per FEMA Act - In the case of foreign investment
  • Complete documentation for an NBFC license
  • Submission of necessary documents with FD receipt before RBI

Documents Required for an NBFC License in India

  • MOA of the NBFC Company

    The object clause in the MOA is depicting the financial/Investment/Lending business.

  • Certified Copy of Registration Certificate

    Obtain a Certified copy of Certificate of Incorporation (COI), MOA & AOA from the Regional registrar of companies

  • Latest KYC

    Need updated KYC & Income proof of Directors and Shareholders

  • Net worth Certificate

    Collect updated net worth certificate of Directors, Shareholders, and Company

  • Clean Banker Report

    Need to Obtain a Banker report about the no Lien remark on the Initial Fixed deposit of Rs 2 Cr.

  • Education Proof

    Proof of educational/professional qualification of the directors of the Applicant company

  • Credit report of Directors and shareholders

    Latest credit reports of directors and shareholders are required.

  • Experience in the Financial sector

    Submit at least one Director's profile with 10+ years’ experience in the financial services sector

  • Underwriting model

    Submit a detail action plan about the loan products, fair practice code, credit and risk assessment policy.

  • Organisation Matrix

    Need to provide organizations structure and decision-making process for approval/rejection of a loan application

  • System and IT Policy

    Submit Information technology policy

NBFC Registration Departments

The founders are required to follow both online as well offline NBFC application process to obtain the NBFC license. The Reserve bank of India is an autonomous body, and it has two departments to regulate and supervise the function of an NBFC.

DNBR (Department of Non-banking Regulation)

The DNBR is responsible for conducting the Fresh NBFC Registration process as well for preparing the regulation for the NBFC. The DNBR has transparent as well innovative assessment process of NBFC Application.

The DNBR will email you or send you a formal notice if they need of any additional documents during the NBFC registration process. The RBI expects your submission/response to a notice within 30 days as per the NBFC regulations.

  • Assessment of Application Submitted for NBFC License (All Category of NBFC)
  • Investigation of Directors / Shareholders Profile
  • Communication with Applicant Company in Pre-Registration Process
  • Communicates Final Decision to the applicant company with the Approval of Executive Director office (RBI)
  • Regulates & Administer NBFC Business in India
  • Publish Notifications, Circular & Order for NBFC

DNBS (Department of Non-Banking Supervision)

DNBS is responsible for post-registration compliance and other administrative issues about NBFCs.

  • After Approval from DNBR (Department of Non-banking Regulation) collects Net owned certificate & Bankers Report – before they issue you the NBFC License (CoR) in Original
  • Responsible for Complying the NBFC Rules and Regulations issued by the RBI
  • Conduct Audit / On-site Inspection from Time to time
  • Communicates with NBFC for all On-going compliance
  • Suspend / Cancel NBFC License in case of Non-Compliance with the Laws
  • Educate and Conduct seminar for the general awareness about the NBFC Regulations, Compliance and Business.

Applicants can expect an NBFC license in 90 to 120 days after successful acceptance of an NBFC application.

How to Apply for NBFC Registration? - NBFC Registration Process Checklist

Before the filing of Application for COR (Certificate of registration), one should read the following checklist of NBFC registration Process.

Hire NBFC Registration Consultants

Hire NBFC Registration Consultants

Step 1

Business Plan

Business Plan

Step 2

Application for CoR

Application for CoR
(Certificate of Registration)

Step 3

Step 1 – Hire NBFC Registration Consultants

  • Experience Matters

    Select an Experienced Consultant with Minimum 10+ years of Experience in NBFC & Banking laws.

  • Credibility

    An NBFC Consultant firm should have a good team size of 100 to 150 with a combination of professionals like CA, CS, Lawyers, and Senior Bankers.

  • Verify Reference

    Ask the NBFC Consultant to give you a minimum of three references of clients

Step 2 – Business Plan

  • Founders and Executive Summary
  • Loan Product
  • Lending Process with SOP (Standard Operating Procedure)
  • SWOT Analysis
  • Credit & Risk Model
  • Competitors Analysis
  • Lending model – Digital / Branch Model
  • Financial forecast

Step 3 – Application for CoR (Certificate of Registration)

  • The middle name of Company must have Finance, Finserv, final, Investment, Capital, Fintech, and Leasing etc. For Example Enterslice Capital Limited
  • Create a Fixed Deposit of Rs. 2 Cr with Scheduled commercial bank
  • Verify the Backgrounds of Promoters
  • Necessary documentation for obtaining an NBFC license
  • Submit an online COR application on RBI's website (COSMOS), thereafter a CARN will be generated
  • Physical submission of Application with the regional department of RBI
  • RBI will scrutinize submitted application and COR will be issued.

What are the Support Services from Enterslice after Certificate of Registration from the RBI?

  • Advisory for Fintech Based Credit Assessment model
  • Assistance in SOP of the Organization
  • Assistance in designing loan product
  • Finalizing reporting formats from various verticals of the organization
  • Guidance on Digital Financial Services Marketing
  • Assistance in developing Company Policies
  • Development of High-Level Business Plan & Investor Deck
  • Helping founders in preparing to go to market strategy
  • Assistance in the fundraising process via FDI Automatic route
  • Assistance in meeting secretarial compliances
  • Assistance in meeting RBI Compliance
  • Advisory on Adoption of Ind-AS
  • Internal Audit Services

What are the NBFC Registration Fees?

For NBFC registration, there is a requirement of minimum capital of Rs. 2 cr therefore an applicant needs to register a company with the prescribed capital along with the requisite government fees.

What are the NBFC Compliances after COR?

There are certain to meet after the completion of the NBFC Registration Process. Additionally, they need to follow the RBI Act, RBI Guidelines, Circulars, and notifications published in the public domain from time to time.

  • Adoption of Fair Practice Code
  • Cosmos Registration
  • FIU-IND Registration
  • CIC Registration
  • C-KYC Registration
  • CERSAI Registration
  • Filling of NBS-9 by use of Online Platform of RBI (COSMOS)
  • Secretarial compliances
  • Compliance of KYC Anti money Laundering
  • Appointment of Statutory Auditor (CA having 5+ years of experience)
  • Statutory Audit
  • Tax Audit.
  • GST Return Filing
  • Income Tax Return filing
  • ROC Returns
  • Any other Compliance / Returns required by the Competent Authority

Fresh NBFC Registration vs. Takeover of Pre-Existing NBFC

Applying for new NBFC Application is always a better option than a takeover of existing ones. The registration of NBFC is simpler than before. This is especially for Foreign Companies, who intends to enter into the Indian Financial service market.

We always advise them to apply for the new NBFC registration Application instead of buying existing NBFC.

Advantages of Fresh NBFC Registration above NBFC Takeover

  • Low Legal Risk

    In case of NBFC takeover, any past Non-compliance with RBI Act may lead to cancellation of the NBFC License.

  • Timeline

    Fresh NBFC Registration can be completed in a period of 90 to 120 days whereas an NBFC Takeover usually takes 5 to 9 Months.

  • Title Risk

    There is no title risk of Ownership after new registration of NBFC. You are the 1st shareholder of the company at another side in acquiring an existing NBFC. You will not be able to establish the precise title of shares.

  • Tax Liability

    Entities are responsible for a tax liability of existing NBFC they are willing to take over.

  • Capital

    In case of new NBFC License application, you may need to block your Rs. 2 Cr / Rs. 20 Million FD in Bank Account. However, the proposed shareholders are required to submit the Bankers report in a case of the NBFC takeover. The report states that the Bank Balance is equivalent to book value of the shares.

What are the Benefits of Fintech Based NBFC Business Model?

The Integration of new age technological advancements with financial business operations is reaping numerous benefits to the economy. There are many advantages of doing so such as

  • Addressing customer problems using technological advancements
  • Online loan facility
  • Working on financial inclusion – app based loan in 30 minutes
  • Creating space for the alternative digital banking system, disrupting conventional business models facing significant legacy issues
  • Use of Big data, AI & Machine learning tools to minimize the fraud

Benefits of Fintech Based NBFC as an Alternative Lending Model

  • Reduction in Operation Cost

    Fintech based NBFC make extensive use of the technology and IT Infrastructure. Hence, the operating cost reduces significantly.

  • Broad Reach

    Fintech NBFC can target a diverse pool of customer beyond geographical limitations. This advantage is outside the scope of the conventional banking system.

  • Higher ROI

    Fintech based NBFC has higher fund cost in comparison to Bank. However, it enjoys a lower customer acquisition cost and lower servicing cost than Banks.

  • Lower NPA than Bank

    Fintech based NPA has higher NPA compare to banks. However, their ROI is much higher than a secured lending model. The alternative lending business model generates twice better profit than traditional lending models.

Why Enterslice

Why Enterslice

400 + NBFC Clients

400 + NBFC Clients

100+ Fresh NBFC Registration

100+ Fresh NBFC Registration

300+ Team of CA/CS/Ex-Banker

300+ Team of CA/CS/Ex-Banker

500+ Cities Served

500+ Cities Served

24X7 Customer Service

24X7 Customer Service

9.9 Customer Score

9.9 Customer Score

98% SLA Delivery

98% SLA Delivery

If you have any additional questions, please feel free to write at Narendra@enterslice.com or Fill the enquiry form as mentioned above, we shall get back to you.

How Enterslice will help you to get NBFC Registration

Fill The Form

Fill The Form

Get a Callback

Get a Callback

Submit Document

Submit Document

Track Progress

Track Progress

Get Deliverables

Get Deliverables

Frequently Asked Questions

Non-banking financial companies aka NBFCs are the financial institution that deals in monetary services. NBFC institutions offer several banking services without having any banking license. They are allowed to involve in financial activities under section 45-IA of the RBI Act.

Any financial body can be considered as NBFC if it registered as per the rules and regulations defined under the Companies Act 2013 and the RBI Act 1934.

Basic Requirement of NBFC registration in India:

Paid-up capital of Rs 2crore and can hold the deposit for the minimum period of 12 months (1 year), and the maximum period it can hold for is of 60 months (5 years).

One needs to follow the prescribed procedure to incorporate an NBFC:

Get your company registered under the Companies Act 2013 or under Companies Act 1956 with a minimum paid-up capital of Rs 2 Crore. Make sure your company has a minimum of 1 director from the same background or a Senior Banker as a full-time director in the company. Company should have clean records of CIBIL. Fill the online application form and submit it along with the requisite documents. A CARN Number will be generated. Submit a hard copy of the application to the regional branch of the Reserve Bank of India. Once the application is examined thoroughly, the license will be provided to the company.

NBFCs are managed by different financial bodies of India such as RBI, IRDA, SEBI, National Housing Bank, and Department of Company Affairs. NBFCs deal in various aspects of financing and they are regulated different financial bodies as per their nature of the activity.

Not every NBFC is required to register under RBI but they are sure to register with the respective regulators they are regulated by. For example:

Venture Capital Fund/Merchant Banking Companies/ Stock Broking Companies are registered with SEBI. Insurance Company must get a certificate of registration with IRDA. Nidhi Companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982. National Housing Bank controls Housing Finance Companies.

Non-Banking Financial Companies are the financial institution that provides banking services to the customers without meeting the legal definition of a bank. NBFCs deals in various sector of finance such as they lend loans and advances, acquisition of shares, bonds, stocks, debentures, securities issued by Government. They cover other aspects of financial dealing as well such as insurance business, chit business, leasing, and hire-purchase.

NBFC are regulated by different regulators in India such as RBI, IRDA, SEBI, National Housing Bank, and Department of Company Affairs.

Create a company with a minimum net owned fund of INR 2 Crores. Open a bank account. To get the certificate of registration apply online to RBI. Submit the required documents to the regional office of RBI. Once the documents are submitted and verified, the regional office sends them to the Central office of RBI, which goes through crucial examination in order to grant the COR. Certificate will be granted if the terms and conditions are fully levied under section 45-IA of the RBI Act, 1934.

NBFCs offer various banking and non-banking services to the people in need. They do not own a banking license for the services they render but follow the rules and regulations adhere by RBI. Reserve Bank of India regulates and supervises the functions of NBFCs according to the provisions mentioned in Chapter III B of the RBI Act 1934. Only a registered NBFC can commence its operation in the market.

NBFCs can accept or renew deposit for a minimum period of 12 months. However, a NBFC cannot accept demand deposit and is not liable to issue cheques.

Get DSC and Din for directors and get a file name approval application. Get an affidavit from directors to fulfill RBI compliance. Draft MOA & AOA and fill file integration forms with the required documents. Acquire a certificate of registration from Registrar of Companies. Deposit net owned funds in a bank account opened for company. Apply for the registration with RBI under RBI Act, 1934. File an online application with the RBI on its official website. Facilitate inquiry in the future once an applicant will get a reference number. Submit the hard copies at the regional office of RBI. Regional office will forward the application for NBFC license to the central office. Once the applicant has fulfilled all the requirements under section 45-IA, the central office of RBI grants NBFC registration. NBFC must commence its business within 6 months from the date of Certificate of Registration.

RBI has the authority to cancel the certificate of registration, in case, if any company is not happy with the RBI order then it has the right to file an appeal against the order within the period of thirty (30) days from the date of the order of cancellation of the certificate of registration communicated to the company.

The list of registered NBFC is available on the official website of RBI. One can check NBFC registration number by visiting www.rbi.org.in.

Certificate of company incorporation, a bank account with a net owned fund of INR 2 crores along with the MoA and AoA of the applicant company. Documents showing the location of the company. Duly filled-in up and signed Annexure I, II and III. Complete and authentic information about the directors of the company and documents related to the management and administration of the company. Well-audited financial accounts of the company for the last three consecutive years. A brief report on the company’s works and activities from the past three consecutive years. Income-tax PAN and any other document if requested.

Reserve Bank of India has defined the term Net Owned Funds (NOF) under section 45-IA of the Reserve Bank of India Act, 1934. As per the act it means:

The accumulation of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the company post deducting the following items from it:

  • Accumulated balance of loss
  • Deferred revenue expenditure
  • Other intangible assets

The final amount is further reduced by the following:

Investment of such companies in the shares of its subsidiaries, same group companies, and other Non-Banking Financial Companies; and

the book of value of debentures, bonds, outstanding loans and advances (including hire purchase and lease finance) made to, and deposits with its subsidiaries and companies within the same group exceeding 10% of the amount calculated in (1) above.

As per the guideline provided by the RBI, Net Owned Funds at the time of takeover should not be less than INR 2 crores

NBFCs raise funds by borrowing money from banks or they sell commercial papers to mutual funds to raise money. They provide this money to small and medium business enterprises, retail customers and so on.

There are certain NBFCs which are controlled by other financing bodies are exempted from the registration with the RBI. Such as, Merchant Banking companies/Venture Capital Fund/Stock- broking companies are registered with SEBI, Insurance companies are registered with IRDA.

Any business that fulfills the following criteria is eligible to apply for NBFC license:

Is registered under the Companies Act 2013 and has the minimum capital of INR 2 crores

It is not mandatory to get NBFC software; you can get it once you are licensed.

A NBFC company cannot take a loan to meet Rs 2 crore requirements.

Yes, you can use initial fixed deposit but for a specified period of time.

Well, it is necessary to have a certain amount of experience to get this license.

Yes, it is necessary to hire an NBFC consultant.

It should not be less than INR 2 crores though limit can exceed.

 

 

 

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" Enterslice use technology better than others. That saves time and money; Team enterslice is more efficient than traditional competitors, and that helps to pass on the cost advantage to its clients. The company is building a high-level transparency in legal services by optimum use of technology and process automation in consulting. I highly recommend this company. "

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" Excellent advisory role by Enterslice Team. They are a trusted partners to us. Narendra and his team helped us with our pre NBFC applications and Post NBFC advisory services. "

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" Amazing services provided by your organization. They have completed our NBFC registration order within stipulated time period of 90 days. They provide constant guidance and support in the process. Their support in building fintech software is amazing. "

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